Insurers Likely to Face New Reviews

By Avery Johnson

Premium increases of more than 10% will be automatically reviewed by states starting in July, according to new preliminary guidelines from the Obama Administration detailed in this WSJ story.

The rules could mean difficult times ahead for insurers, who have said that they need to increase prices to keep up with rising medical costs and new mandates under the health-care law. America’s Health Insurance Plans, the industry’s trade group, issued a rebuttal.

“While the proposed rule gives consideration to the impact of rising medical costs, it also establishes a threshold for review that is incomplete because it does not adequately factor in all of the components that determine premiums, including the cost of new benefit mandates and the impact of younger and healthier people dropping coverage,” said Karen Ignagni, president of the group. “It is also important to remember that the new federal law already caps health plans’ administrative costs and profits.”

Insurers prefer to see oversight run at the state rather than federal level, and the proposed rule appears to leave regulation mostly in state hands. “We agree that states are best suited to review premiums because they have the experience, infrastructure, and local market knowledge needed to ensure that consumers are protected and health plans are solvent,” said Ms. Ignagni. “The federal government is not in position to make these assessments.”

Consumer groups such as Health Care for America Now called the rules “an important victory over the $800 billion-a-year health insurance industry.” Others saw room for improvement: Consumer Watchdog said the regulation still allows insurers to keep secret some details of how they calculate rates, and called on the Administration to require disclosure of all predictions and actuarial assumptions made by insurers.